Bitcoin is the first cryptocurrency: a digital currency that people can send to each other over the internet without a bank. Transactions are recorded on a public blockchain kept by thousands of computers around the world. No company or government controls it, and its supply is capped at 21 million coins.
Since its launch in January 2009, Bitcoin has grown from an experiment shared on a mailing list into an asset held by individuals, companies and exchange-traded funds. This guide explains what Bitcoin is, how it works, its history, what people use it for, its risks and how to get started safely.
What is Bitcoin, exactly?
The word covers two things. Bitcoin (capital B) is the network: open-source software and a shared ledger, the blockchain, that records every transaction since 2009. bitcoin (lowercase, ticker BTC) is the unit of currency that moves on that network.
One bitcoin divides into 100 million smaller units called satoshis, so you never need to buy a whole coin. Bitcoin was described in a nine-page whitepaper published on 31 October 2008 by Satoshi Nakamoto, a pseudonym whose real identity has never been confirmed. If the idea of a shared ledger is new to you, read our guide What is blockchain? first.
How does Bitcoin work?
Wallets, keys and addresses
To use Bitcoin you need a wallet: an app or a device that holds your private keys. A private key is a secret number that lets you sign transactions; from it, the wallet derives public addresses you can share to receive funds. Whoever holds the keys controls the coins. Most wallets back up the keys as a 12- or 24-word seed phrase.
Transactions and the blockchain
When you send bitcoin, your wallet broadcasts a signed message to the network. Thousands of nodes, computers running Bitcoin software, check that the signature is valid and that the coins have not already been spent. Valid transactions are then grouped into a block.
Mining and proof of work
Blocks are added by miners, who compete to solve a computing puzzle. This method, called proof of work, makes rewriting history extremely expensive. A new block is found roughly every 10 minutes; every 2,016 blocks (about two weeks) the network adjusts the puzzle’s difficulty to keep that pace. The winning miner earns the transaction fees plus newly created bitcoins, the block reward.
The halving and the 21 million cap
Every 210,000 blocks, about every four years, the block reward is cut in half. This event is called the halving. The latest took place on 20 April 2024 at block 840,000 and reduced the reward from 6.25 to 3.125 BTC. The next is expected in 2028. Because of this schedule, no more than 21 million bitcoins will ever exist, and the last fractions should be mined around 2140.
Faster payments with the Lightning Network
The main blockchain handles only a limited number of transactions per block. The Lightning Network, a “layer 2” built on top of Bitcoin, lets users open payment channels and send small amounts almost instantly for very low fees, settling the final balance on the main chain later.
What gives bitcoin its value?
Bitcoin is not backed by a government, a company’s profits or a physical commodity. Its price comes from supply and demand: the supply is fixed by code, and demand comes from people who trust the network’s rules and want to hold or use the coins. Supporters point to its scarcity, a network that has run for more than 15 years, and the fact that no one can create extra coins. Critics answer that its value rests only on collective belief and that it produces no income, unlike shares or bonds. Both views are worth knowing before you buy.
A short history of Bitcoin
- 31 October 2008: Satoshi Nakamoto publishes the whitepaper on a cryptography mailing list.
- 3 January 2009: the genesis block, the first block of the chain, is mined.
- 22 May 2010: programmer Laszlo Hanyecz pays 10,000 BTC for two pizzas, the first widely known purchase with bitcoin.
- February 2014: Mt. Gox, then the largest exchange, collapses after losing hundreds of thousands of customers’ bitcoins, an early lesson in custody risk.
- August 2017: the SegWit upgrade activates; the same month, a group that wanted bigger blocks splits off to create Bitcoin Cash.
- September 2021: El Salvador makes bitcoin legal tender. In January 2025, under a loan agreement with the IMF, it amends the law and makes accepting bitcoin voluntary.
- November 2021: the Taproot upgrade improves privacy and flexibility of transactions.
- 10 January 2024: the US Securities and Exchange Commission approves the first spot bitcoin exchange-traded products, which start trading the next day.
- 20 April 2024: fourth halving, the block reward drops to 3.125 BTC.
- March 2025: a US executive order creates a Strategic Bitcoin Reserve, funded with bitcoins already seized by the federal government.
What is Bitcoin used for?
- Saving and investing: many holders see bitcoin as “digital gold”, a scarce asset outside the banking system. This thesis is popular but debated, given the price swings.
- Sending money across borders: a transfer works the same way to a neighbour or to another continent, 24/7, without a bank in between.
- Protection against unstable currencies: in countries with high inflation or capital controls, some people use bitcoin to keep savings out of a weakening currency.
- Everyday payments: possible, especially through Lightning, but still uncommon in the US and Europe, where most merchants do not accept it.
- Institutional exposure: spot ETFs and listed companies holding bitcoin give investors indirect exposure without managing keys.
The risks of Bitcoin
- Volatility: bitcoin’s price can fall by more than half in a few months. It lost more than 70% of its value between November 2021 and November 2022, for example.
- Loss and theft: if you lose your seed phrase, your coins are gone for good. If a scammer gets it, they can empty your wallet in minutes.
- Platform failure: coins left on an exchange depend on that company. Mt. Gox in 2014 and FTX in November 2022 left customers waiting years for partial repayment.
- Scams: fake investment platforms, “doubling” giveaways and romance scams often ask for payment in bitcoin, precisely because transfers cannot be reversed.
- Regulation and tax: rules differ by country and change. Gains are generally taxable, and you must report them.
- Energy use: mining consumes a lot of electricity, which draws environmental criticism and, in some places, restrictions.
How to get started with Bitcoin safely
- Understand before you buy. Read the bitcoin.org introduction and our Bitcoin (BTC) page for the key facts.
- Choose a regulated platform. In the US, check state licences and FinCEN registration; in the EU, check that the provider holds a MiCA authorisation. Our guide how to buy crypto explains each step.
- Start with a small amount. You can buy $20 worth of bitcoin. Only invest money you can afford to lose entirely.
- Consider regular purchases. Buying a fixed amount each month, known as dollar-cost averaging, spreads your entry price over time and avoids betting everything on one day.
- Secure your coins. For larger amounts, move them to a wallet you control, ideally a hardware wallet, and write the seed phrase on paper. Never share it with anyone.
- Keep records. Save every purchase and sale for your tax return.
Key takeaways
- Bitcoin is a decentralised digital currency launched in January 2009, recorded on a public blockchain.
- Miners secure the network with proof of work; a new block arrives about every 10 minutes.
- The supply is capped at 21 million; the halving cuts new issuance every four years, most recently in April 2024.
- It is used to save, invest and send money across borders, but its price is highly volatile.
- Whoever holds the private keys controls the coins: buy on a regulated platform, start small and protect your seed phrase.
